Affordable Higher Education: 2012 State of the Union Address

President Obama’s remarks during the 2012 State of the Union Address regarding the cost of college centered on student loan interest rate relief, tuition tax credits and increasing the number of work-study jobs. Also, he challenged colleges and universities to keep tuition rates from increasing or face the possibility of receiving less federal funding. See the following excerpt,

“When kids do graduate, the most daunting challenge can be the cost of college. At a time when Americans owe more in tuition debt than credit card debt, this Congress needs to stop the interest rates on student loans from doubling in July. Extend the tuition tax credit we started that saves middle-class families thousands of dollars. And give more young people the chance to earn their way through college by doubling the number of work-study jobs in the next five years.
Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford.”

What does this mean to those families with students heading to college for the 2012-13 academic year for the first time or those returning college students?

For Undergraduate students, the Federal Direct Subsidized Student Loan fixed interest rate is currently at 3.4% and the interest rate is scheduled to increase to 6.8% on July 1, 2012. Also, the current Federal Direct Unsubsidized Student Loan fixed interest rate is currently at 6.8% and it is scheduled to remain the same.

Increasing the number of college jobs in the Federal Work-Study program over the next five years is a step in the right direction. However, the work-study program has limited positions available per college, students have to be eligible and “hired” for the job. Also, typically students are paid every two weeks for hours worked throughout the academic year. More importantly, unlike grant/scholarship aid awards, being awarded a work-study job does not immediately impact the bottom line cost of the respective college.

Certainly tuition tax credits benefit those taxpayers that qualify but the most important piece of the discussion is the ever increasing tuition costs. College and Universities have significantly raised tuition and fees over the past twenty years, so families need to be more focused on the actual costs of college over the next four years. Focused discussions on the college major, career aspirations, borrowing loans to pay for college and the actual return on the investment are important to students and families striving to make college affordable.